What is cryptocurrency learn basics in simple words
Here you will find information about, What is a cryptocurrency and how does it differ from fiat and digital money? What are blockchain technology and cryptocurrency mining? What are the ways to make cryptocurrency? in simple words.
Advantages of upcoming technology innovation
Hello! One of the many advantages of the Internet is the development of new types of currencies. Unlike traditional paper money, these new currencies have changed the way in which values are exchanged. In today’s world, one can often hear phrases such as “digital currency” and “cryptocurrency.”
These words cause the same reaction of most people, who believe that they mean the same thing or are closely related to each other. But is it really? Today we will try in simple words to tell you what cryptocurrency is, and how it differs from digital currency, what blockchain and mining cryptocurrency is, and also what are the ways to make cryptocurrency.
What is a cryptocurrency?
Two words – “crypto” (data encryption) and “currency” (medium of exchange) formed Cryptocurrency. Thus, a cryptocurrency is a medium of exchange (like ordinary money) that exists in the digital world and uses encryption that ensures the security of transactions. A cryptocurrency is an alternative form of payment in cash and credit cards.
In simple terms, cryptocurrency is a type of digital or virtual money. It serves as ordinary money, such as dollars, pounds, euros, yen, etc. But it has no physical counterparts — banknotes or coins that can be carried around, that is, the cryptocurrency exists only in electronic form.
How is crypto different from the digital currency?
Unlike fiat currency (legal means of payment, which includes most paper money), the digital currency does not have physical equivalence stored in the form of cash or gold. It consists of arbitrary numbers stored in a user account.
Like regular cash, digital currencies are accepting as a means of payment. Also, It uses to purchase goods and services. They can transfer between accounts, and they can also exchange for cash/fiat currency locally.
Reasons make crypto different
Cryptocurrencies are a type of digital currency. They have arisen to address the problems of centralization, confidentiality and security problems associated with conventional digital currencies.
Cryptocurrencies use the principle of decentralization. This means that cryptocurrency owners don’t control them, and no financial authorities regulate them. Because cryptocurrencies use cryptography, they offer a robust security system that is hard to crack.
Below is a list of the main distinguishing features of cryptocurrencies from digital currencies and fiat money:
1. Decentralization
As in the traditional banking system, regulatory agencies regulate most digital currencies, such as the Central Bank and other government agencies. This means that all, These regulatory bodies determine the exchange rate and control all currency exchange transactions.
On the other hand, cryptocurrencies are completely decentralized. This means that no state can control them. The cryptocurrency community establish the rules for it.
2. Anonymity
With digital currencies, it’s almost impossible to hide account holder information. To use electronic wallets like PayPal, you need to provide personal information such as your name and address.
On the other hand, you do not have to disclose any personal information when you open a wallet for trading cryptocurrency. Coins ensure complete anonymity such as Dash.
3. Transparency
The digital currency structure allows only government organizations to access information about transactions.
On the other hand, cryptocurrency transactions are publicly available. You cannot find out who is behind a specific account, but you can track transactions and monitor the amount of money in the system.
4. Transactions
Because transactions are monitored by central authorities when using digital currency, they can easily mark transactions as suspicious, or even block an account.
On the other hand, once the cryptocurrency transaction is completed, it is automatically added to the blockchain and becomes irreversible forever. No one can block your wallet and transfer your funds to another account. Since the exchange of cryptocurrencies is carried out without intermediaries, the transactions have high speed and low commissions.
5. Security
When you open the cryptograph, you get a private key, which is impossible to crack if you keep it in a safe place. But do not lose it, because without it you will not be able to enter your wallet, and you will not be able to restore it.
In the above article, I tried to explain a bit about What is cryptocurrency, hope you like it.
Tip*: Allways get a safe, secure, and trusted wallet to store cryptocurrencies.
